ENERGY INVESTMENTS IN RURAL OPPORTUNITY ZONES
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SUPERIOR RETURNS
Typical oil and gas investments returns are generally multiples of what is common for most OZ investments . The appreciation and growth potential make them especially well suited to the OZ incentive .
This map shows OZs in blue and drilling rigs on location at present for Texas containing some of the largest and most energy prolific OZs as of October 2021 :
Source : EOF map compiled using Enverus and U . S . Dept . of the Treasury , CDFI GIS data
INELASTIC DEMAND
The map above shows that many wells will be drilled in OZs over the coming months . Each yellow dot represents a planned new horizontal well to be drilled in the next few months . Wise investors are acquiring mineral rights now to position themselves in front of the incoming drilling rigs .
A significant portion of the U . S . daily production of over 11 million barrels of oil per day is presently sourced from OZs . 1 This will only increase as the U . S . consumes over 19 million barrels of oil per day at present . Each 1 million electric vehicles added to the U . S . vehicle fleet displace less than 40,000 barrels per day of demand , or less than 2 / 10ths of 1 % of current U . S . oil demand . 2
UNDERINVESTMENT IN NATURAL GAS CAUSING ENVIRONMENTAL HARM
Natural gas prices continue to rise . Current spot prices are over 250 % higher than 2020 levels . Prices have increased from the 2020 average of $ 2.06 / MCF to the current price of over $ 5.90 / MCF . Because of record setting global demand for natural gas , exports are the largest factor in the current domestic natural gas price as U . S . LNG ( liquefied natural gas ) exports have increased from 4 BCFD at the end of 2020 to a projected average of over 18 BCFD for 2021 and well over 21 BCFD in 2022 as new export facilities are commissioned . LNG exports consume over 15 to 20 % of U . S . natural gas production . 3
This map shows OZs in blue and the locations of new wells to be drilled in the next 12 months are represented by a yellow dot as of October 2021 :
Source : EOF map compiled using Enverus and U . S . Dept . of the Treasury , CDFI GIS data
The natural gas price will continue to increase through 2021 to 2022 as Europe and Asia attempt to balance their increasing reliance on intermittent energy sources while at the same time shutting down base load sources , such as nuclear and coal . This rebalancing will likely result in no change to EU carbon policies , which will further increase reliance on intermittent sources , which in turn will increase the price premium paid to secure longer term reliable LNG supplies to backstop the mostly intermittent replacement sources . This is a very positive long term trend that will provide a solid foundation for U . S . natural gas prices which will support highly profitable investments to increase supply , much of which will be sourced from opportunity zones .
While the traditional energy space will enjoy record prices and profits as shortages continue to manifest themselves worldwide , the root cause is underinvestment causing natural
Natural gas prices continue to rise . Current spot prices are over 250 % higher than 2020 levels .
OPPORTUNITYZONE . COM